Facing an onslaught of ultra-power efficient, highly clocked, multi-core ARM CPUs from the likes of Qualcomm, NVIDIA, and Texas Instruments, Intel, the world's largest CPU maker, has plenty to worry about.

But it's seemed remarkably unconcerned; stating that its smartphone chips will equal ARM chips in power performance and beat them in computing power by later this year.  Now Kirk Skaugen, general manager of Intel’s data center unit has gone on the record at a Morgan Stanley conference to say that Intel's server business is in no danger from ARM.

Like mobile devices, power efficiency is a key concern for servers.  Businesses keenly watch how to minimize the power they use per unit of computing power.

But Intel is convinced that businesses won't be interested in ARM servers, as it admits that its own efforts to put Atom systems-on-a-chip on servers was met with disappointment.  States Mr. Skaugen:

We’ve been out talking about Atom and servers for... And candidly, there hasn’t been a lot of interest in that architecture in a broad sense. I could see if you go out four to five years maybe 10% of the total market, give or take a couple percent, could be interested in such an architecture.

He backtracks a bit acknowledging that for some customers a low-power solution like Atom (or ARM) would be a good solution.  And he says it’s a tempting one to try to sell as the margins are bigger.  He explains:

What SeaMicro has done is they’ve put 512 Atoms into a 10U form factor. So if everybody in the world took a Xeon and bought an Atom because their servers were underutilized that would be a bad thing for Intel and our OEMs. That’s not what we hear from the customers on what they’re interested in doing. What they’re interested in doing is getting, for example, for dedicated hosting — let’s say they have $140,000 to spend, they’re wanting to know how many hosting nodes or how many customers they can host. So what SeaMicro has done is they’ve said, hey, I’m going to sell a $148,000 Atom server, they put 512 Atoms into a 10U and they say you can buy either I think 89 one-socket Xeons for the same price, 1U pizza box machines, so you can buy 89 1U’s or you can buy the single system which has 512 nodes in it…

Atom makes good margin for Intel; if the workload actually works that’s incredibly good.

So if some customers are interested, why does he see them picking Atom over ARM cores?  He says compatibility is the key issue:

Now what’s the challenge that ARM has in that same form factor? Well, it has an instruction set issue. So if you’re going to do hosting what application do you host? And what is an application porting effort — we did application porting with Itanium, it took us about 10 years. Hundreds and hundreds of millions of dollars to port about 14,000 applications. ARM has to port for hosting all those applications over. Second challenge is the A9 and the A15 as we know it are 32-bit processors. Microsoft only supports 64-bit operating systems today. So I’d encourage you to go ask Microsoft what their position is on 32-bit operating systems. But I think they’re pretty firm on their 64-bit. So it’s an instruction set issue as well as a 64-bit issue. Everything we do in servers for real servers will be 64-bit.

Of course, he's largely right on both points -- low computing power chips will have trouble gaining traction with many server customers, and there are major compatibility issues holding back ARM in both the laptop and server markets.  

But with Microsoft migrating its core code base to natively support ARM, that could be changing.  Holding up compatibility as a barrier to embracing a superior hardware product is valid to some degree, but in the long run such barriers are invariably eliminated.  Like it or not, Intel may have more of a fight on its hands in a number of markets than it's willing to admit, and its rosy outlook for the smartphone industry may be met with a dose of reality if it proves unable deliver the superior smartphone chips its promises to be shipping by the end of the year.